Figuring out taxes can feel like putting together a one-thousand-piece puzzle. Fortunately, the seasoned maestros of the financial world step in to help employees, investors, and business owners alike. Tax professionals aren't just number crunchers; they're wizards who can conjure up savings you might not have even known existed. That being said, paying for tax preparation services isn't always the best move. Here's how to tell when to hire a tax preparer and when it might be better to keep it in your own hands.

REASONS TO HIRE A PROFESSIONAL TO DO YOUR TAXES
Hiring a tax professional is a prudent choice when dealing with complex financial situations. They can save you time, ensure compliance, and often identify opportunities for tax savings that you might have overlooked. Here are the situations where it's best to hire a professional to do your taxes:

1. BUSINESS OR SELF-EMPLOYMENT
If you own a business or are self-employed, your tax situation can be considerably more complex than that of a W2 employee. Specific tax codes and deductions apply to businesses, and a tax preparer will have the expertise to navigate these intricacies.

For example, inventory storage costs are deductible for small businesses. In addition, a tax professional can help you report income and expenses correctly, which is crucial to avoid penalties or audits.

2. COMPLEX INVESTMENTS
A diverse investment portfolio involving stocks, bonds, real estate, and other assets can cause unforeseen tax implications. A tax professional can help you navigate the tax treatment of various investment income and losses. Calculating capital gains and losses, especially in cases where you've bought and sold investments at different times and prices, can be challenging.

For instance, selling stocks doesn't always yield the same tax result. Holding the asset for over a year before selling moves you into long-term capital gains taxes, which have different rates than short-term capital gains. Tax preparers can optimize these calculations to minimize your tax liability.

3. ITEMIZING DEDUCTIONS
Itemizing deductions requires a deep understanding of tax laws and the ability to discern which expenses qualify. A tax professional is well-versed in this area and can help you maximize your deductions.

A tax professional can also guide you on what documents to retain for your deductions. For example, if you work from home, you can deduct costs for your home office space. In addition, certain deductions, like those related to medical expenses or unreimbursed employee business expenses, can be complex and might require professional tax services to navigate.

4. LIFE EVENTS
Changes in marital status can significantly impact your tax situation. A tax preparer can help you understand the tax implications of these events and ensure that you're filing correctly. Likewise, having a child or adopting can introduce new tax credits and deductions. Plus, dealing with inherited assets or estate planning involves complex tax considerations.

PROS OF HIRING A PROFESSIONAL TAX PREPARER
Hiring a tax professional means paying for expertise, but there are advantages, including:

• Saving Time and Reducing Stress: Hiring a tax professional means taking your tax return out of your hands and trusting a trained expert. Tax preparation can be complex and time-consuming, especially if your financial situation is less than straightforward.
• Specialized Knowledge: Tax professionals have in-depth knowledge of tax laws and regulations. They stay up to date with the latest changes, allowing them to provide informed advice based on the current tax climate. For instance, the Tax Cuts and Jobs Act doubled the standard deduction amount and changed who benefits from itemizing deductions.
• Error-Free Returns: With their expertise, tax professionals ensure your tax return is accurate and error-free. This way, you won't have to wonder about mistakes you may have made when filing.  Representation in Audits: If you are audited by the IRS, a tax preparer can act as your representative and guide you through the audit process.
• Maximizing Deductions and Credits: Tax professionals are invaluable for individuals who itemize deductions and aim to maximize their tax benefits. They know how to identify all the deductions and credits you qualify for, including obscure ones.

CONS OF HIRING A PROFESSIONAL TAX PREPARER
However, hiring a tax professional also comes with drawbacks, including:

• Financial Cost: Paying for professional tax services usually costs hundreds of dollars. In addition, fees can increase if your tax situation is more complex. As a result, for individuals with straightforward tax returns, the expense of hiring a professional may outweigh the benefits.
• Liability for Mistakes and Penalties: Even if you hire a tax professional, you are ultimately responsible for the accuracy of the information provided on your tax return. If there are errors, omissions, or misrepresentations, you could still be subject to penalties or audits.

While a tax preparer can help prevent errors, they cannot completely absolve you of liability. In addition, you may owe a penalty if the tax professional submits your report late. An inexperienced or unqualified tax professional may not provide the expertise needed to ensure an error-free return.

SHOULD I HAVE MY TAXES DONE PROFESSIONALLY?
Hiring a tax professional makes sense when you have complex financial situations, such as owning a business, dealing with intricate investments, itemizing deductions, or experiencing significant life events like marriage, divorce, or inheritance. A tax professional's specialized knowledge and ability to minimize errors and penalties are invaluable in these scenarios.

However, for those with straightforward financial situations, the cost of hiring a tax preparer may outweigh the benefits.

Here's an example of when it makes sense to hire a tax professional: Say you're a self-employed freelance consultant with various clients. You also own two rental properties. Because you run your own business and own income-producing assets, it's best to hire a professional to comply with tax laws and maximize deductions.

On the other hand, it may not make sense to pay for tax preparation services if you're a salaried employee with no additional sources of income or investments. Your financial situation is simple, and you'll claim the standard deduction when you file. Using tax software or preparing your return yourself is a more cost-effective option.

Ultimately, whether or not to hire a tax professional depends on each individual's unique financial situation. Factors such as business ownership, complex investments, itemized deductions, and significant life events should be considered. It's crucial to weigh the potential benefits against the financial cost to determine the most suitable approach for tax preparation.